Senior private credit executives pushed back on market concerns about the asset class at Debtwire’s Private Credit Forum this week, with Blackstone’s Brad Marshall calling the fears “overly manufactured.”

According to Marshall, global head of private credit strategies at Blackstone, investors should focus less on headlines and more on underlying company fundamentals.

“I’ve been doing this at Blackstone for 21 years, this is nothing out of the ordinary and default cycles are normalizing. The investment environment is pretty good. I think we’re in this period where fear is being overly manufactured,” he said.

The Blackstone veteran also defended the structure of the firm’s private credit vehicles, amid heightened scrutiny of semi-liquid funds and recent redemption pressures across the sector.

“The structure is working well and there’s a little bit of a narrative that people don’t know what they got into, and that people are running for the doors. I think all of that is sensationalized. People know what they’re investing in, and most investors are staying invested for the long term.”

Looking ahead, Marshall said private credit is entering an “era of dispersion,” where manager performance will depend on how firms handle troubled credits and restructuring situations.

The theme of dispersion was echoed throughout the day. During a panel on private credit as a maturing asset class, several investors argued that recent headlines have obscured generally stable credit performance.

When asked to describe the outlook for private credit in one word, Jason Mandinach, who leads the credit and private strategies group at PIMCO, responded: “dispersion.”

“You’re going to see a lot of dispersion across asset types, sectors, managers,” said Mandinach, adding that while some areas of the market remain attractive, “there’s a lot of both public and private credit that is priced to complacency and there’s decent room for disappointment over the next year or two as cyclicality returns to credit markets.”

Brian Stewart, partner and co-head of global corporate credit at Fortress Investment Group, also pushed back on suggestions that credit deterioration is happening across portfolios.

“We haven’t observed anything thematic in credit stress in any sector in our own portfolio,” Stewart said. “There’s really no fundamental deterioration in software borrowers [… ]. I think that the stress in that sector is one of leverage and valuation, where valuation and leverage were put in place with one valuation paradigm, and now that’s changed.”

That theme resurfaced throughout the conference as speakers debated whether the market faces a genuine credit cycle or a more manageable period of refinancing.

“It’s not a credit cycle, it’s a challenging refinancing cycle,” said Ray Costa, managing director and head of US special situations at Benefit Street Partners.

Costa argued during the ‘opportunistic credit’ panel that much of today’s stress stems from debt originated in 2021 and early 2022 when interest rates were much lower, and there is now a huge opportunity to provide solutions capital to refinance the debt.

“The market created a tremendous amount of credit that was based upon a set of assumptions that did not play out in terms of the cost of capital.”

Rob Ruberton, co-founder of Lane42, echoed that view during the same panel.

“It’s not a credit cycle, it’s a capital structure cycle,” Ruberton said, arguing that many businesses remain fundamentally sound, but are carrying excessive leverage.

“It’s not the underlying credits that are broken, it’s the capital structures,” said Ruberton. “I think you’re going to go through this period of de-leveraging of the middle market because a lot of these businesses just can’t support this level of debt.”

On the topic of AI, many speakers acknowledged that it could create winners and losers across industries, but several panelists also argued that the risk is overblown.

“The fundamentals haven’t dramatically changed for us and the headlines got ahead of all of that,” said Jeffrey Fitts, head of workout and value enhancement at HPS Investment Partners, a part of BlackRock.

Fitts’ comments were echoed by other restructuring specialists, who said activity levels have remained relatively stable despite the negative headlines surrounding private credit this year.

“We’re kind of at the same level we were last year,” Fitts said when asked about restructuring activity, which was mirrored by fellow panelist Fran Blair, head of restructuring and post-reorganization governance at PSP Investments.

“I don’t think I’m materially busier than I was at this time last year,” Blair said.